Prosper interest rates are on the rise — in case you where wondering this is a good thing for lenders!
The release of the lender bidding guidance (general announcement, secondary analysis) seems to line up with a rise in near prime and sub prime interest rates. Similarly, the graph that I am using to demonstrate my point is coming from Eric’s Credit Community who is today’s guest blogger on the Prosper Blog: Follow the Leader: Watching Lenders and Groups on ericscc.com. Coincidence?
Educating lenders to their risks seems to have had a dramatic effect. Kudos Prosper.
I wonder if the borrower listing rate guidance is having a similar effect on starting interest rates?
Here is what I came up with for average listing starting rate since 09/01/2007 (7 Day moving average). This would be better if a 30 day moving average like the above graph from EricsCC, but we don’t have enough data yet…
Here is the sql:
select aday,creditgrade,avg(borrowermaximumrate) from listing inner join alldays on startdate>=(aday-6) and startdate<(aday+1) where aday'9/1/2007' group by aday,creditgrade order by aday,creditgrade
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6 comments ↓
I wonder how Chris Larson will connect this to the latest Fed rate cut.
Since Prosper raised the interest rate ceiling to 35%, it makes sense that the interest rates would be on the rise. Plenty of HR and E listings were hitting that ceiling. This allows for better differentiation of loans by interest rate (which could be seen as a proxy for risk)
I actually don’t think raising the ceiling has the most effect…
I the majority of the effect if from informing the lenders of the expected ROI and from informing the borrowers where to start in order to have the best chance of funding…
However raising the ceiling surely allows for some higher interest rates and may explain why the adjustment has been steeper in the sub prime as opposed to near prime.
I followed up on your comment/suggestion to getting a Prosper loan. I’m actually already a borrower. I got a great deal (especially compared to these number) with a 14.94% rate for a D rating. Luckily people were able to see past my rating to my honesty and potential. However, only 6 months later, its not likely that my rating has increased, so what are the chances of getting a rate under 14%? I’d say its not likely, but I could be wrong.
[...] If you’re new here, you may want to subscribe to the Personal Loan Portfolio RSS feed or take a look at the site map. Thank you for visiting!I started peer-to-peer lending with Lending Club for several reasons, but I will invest my next $500 with Prosper Marketplace loans lat this week due to several factors including increasing interest rates and improving collection efforts. [...]
[...] slices are effectively the prosper select interest… And while bidding guidance has caused Prosper Interest Rates On the Rise in the lower credit grades they have caused interest rates within the index to [...]
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